2016 Mortgage Rule Changes

You may have already heard and/or made aware of the the recent Canadian mortgage rule changes that take effect this October 17th.  But we wanted to highlight one specific adjustment that will impact real estate sales immediately, and will have definite short and long term effects (some of which are unknown at this time).

The Change – Buyers looking to purchase with less than a 20% down payment (an insured mortgage) will have to face a "Stress Test" meaning that regardless of the lender's actual rate given to the buyer, (likely around 2.49%) he/she will have to qualify based on the Bank of Canada's posted rate which is currently 4.64%.

Impact on Buyers – The "Buying Power" for buyers in general will change dramatically on Oct 17, 2016 and all approvals for specific properties must be finalized prior to that date. 

Impact on Sellers – With buyers not being able to borrow as much as before, in some cases up to 20% less, there will be downward pressure on pricing and an expectation of sellers to "fill that gap". Of course, there will have to be adjustments on both sides; what buyers realistically can afford and get approved for AND what sellers need to adjust to in order to attract current buyers in this new market place. We don't expect 20%, but serious sellers will want to get ahead of their competition quickly. 

Morneau announces new housing rules but says market is 'sound':
More detailed article from Huff Post:
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